Monday, March 03, 2008

Bringing back tolls on Quebec highways

The scope of roadwork announced in February by the Quebec Department of Transport ($12 billion from 2008 to 2012) suggests the extent to which the maintenance of highway infrastructure has been neglected in recent years. Last October, the Montreal Economic Institute published an Economic Note outlining tolls’ efficiency in financing the highway network.[1] The Note showed that this type of revenue collection best respects the user-pay principle.

No highway or bridge in Quebec is currently covered by tolls, unlike the situation that prevailed until the 1980s.[2] This will soon change, however, with the new Highway 25 bridge and the extension of Highway 30. The government has also made it known that tolls would play a bigger role in the near future.[3]

This Economic Note presents four scenarios in greater detail to show that a return to tolls is realistic: a) on Montreal Island bridges; b) in the Montreal metropolitan area; c) in a group of urban areas; or d) on all of Quebec’s main highways. In each scenario, it is assumed that electronic tolls will be used since this costs less and minimizes disruption to traffic flow. We will then raise the issue of how the funds collected should be used.

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A “network” approach to tolls

Designing a toll plan is complex and requires detailed analysis. The figures presented in this document, while realistic, should be seen only as an approximation of the real income generated by the return of tolls to the Quebec highway network. More detailed modelling will be needed to reach an enlightened decision.

It should be emphasized that a “network” approach is fairer and economically more efficient since it avoids two types of cross-subsidization. The first type is geographic, with motorists from one area paying for a service received by motorists from another area. For example, putting tolls only on roads in the Montreal area or in urban areas generally would amount to cross-subsidizing motorists in the rest of the province or in rural areas if the amounts collected were used to finance maintenance of the entire network. The second is sectorial in nature, with the amounts collected in tolls being used for purposes other than the maintenance and rebuilding of roads. For example, paying toll income to public transit or straight into the consolidated fund would be equivalent to subsidizing all taxpayers with money taken from motorists.

It is better to take a “network” approach to the return of tolls rather than linking it to the completion of particular projects. It would thus be logical to extend tolls gradually to all highways with sufficient traffic volume, as is done in a number of countries.

[1] To lower risk, to promote innovation and, above all, to avoid the government being tempted to reach into toll revenues for purposes other than maintaining and rebuilding infrastructure, it would be desirable for new tolls to be set up in the form of public-private partnerships.[2][1] To look into the various forms and systems of tolls in Europe, consult ASECAP, Tolled infrastructures within ASECAP, 2007, and Siemens Electronic Tolling, Road User Charging Schemes in Europe: Current Experiences and Future Trends, 2007. For Washington State’s experience, consult Washington State Department of Transportation, Comparative Analysis of Toll Facility Operational Costs, 2007.[2] See Mathieu Laberge, Road repairs and public-private partnerships, Montreal Economic Institute, October 2007.[1] See Mathieu Laberge, Tolls as a solution for financing the road network, Montreal Economic Institute, October 2007.[2] Fred Nix, Alternative Road Financing Arrangements, 2001, p. 8.[3] Denis Lessard, “Les péages vont se multiplier”, La Presse, October 19, 2007, p. A-2.